Product Notes

https://www.hmoperationsmanagement.com/post/product-notes

In Japan, we have this gifting season. There are two such seasons, one at the end of the year and the other in the mid-summer. A huge shopping season. And the classic tragedy of such a season is that you will face the push of gifts. “Mr. XX brought us the sweets.” “Again!? This is the third day in a row.” With the pressure of expiration dates and unwillingness to throw away the sweets, we are forced to eat all of them.

Although we still see such tradition, some merchants and presenters have devised a brilliant solution. Instead of gifting a sweet or a food, they give the “Product note.” The receiver can convert this note to a product when they want to. They can avoid the pushed present situation.

There is a long history of such tradition. They say it started four hundred years ago in Sendai. This region has a tradition of gifting Tofu at a particular time of the year. And, unlike Tofu that you see in Today’s market, which has a one-month or more shelf-life, Tofu is a very fragile product. It is produced in the morning and must be consumed by the night. You can’t store it. (Authentic Tofu is still sold in this way.) Conversely, from the Tofu producer's point of view, you will have high demand in that season. What’s the point of producing something that will be discarded?

The Tofu merchant in Sendai developed an exciting device. A Tofu note. Those who have the note can exchange it for real Tofu when they want. Customers don’t need to be pushed to eat Tofu on a specific day. And the producer can experience leveled orders. The note spread quickly in the region.

As this Tofu note became popular in Sendai, other regions and products followed.? Manjyu (Sweet), Youkan (Sweet), Sake (Rice alcohol), Sushi, Kamaboko (Fishcake), Fish, Katsuobushi (Dried fish for seasoning), etc. All these products had specific notes to be picked up at a specific store. The most important one is the rice. Rice was the center of the economy at that time. The tax was paid mainly in the form of rice. Samurai were paid by rice. Yet, they could become short of cash before the harvest. Some merchants, such as the Sake producers, want to guarantee that they will buy some rice before harvest. Such needs made the rice note wildly popular and became money notes. Cash-shorted Samurai have often issued more rice certificates and dishonored them. Rice notes became the finance market.

The original name of such a note was called “Kitte.” “Kitte” stands for postal stamps today. But it meant a product note initially. “Kitte （切手）” is an abbreviation of “切符手形,” which stands for Kippu (Ticket) Tegata (Note, Bill). But when the Meiji government started the postal service and called the postal stamps “Kitte,” they prohibited using the word “Kitte” as a product note. Yet, the tradition of product notes remains popular, as of today.

There is an essential similarity between the product note and Kanban. That is trust. Without trust among the different people, such a paper will not have any meaning. If the Tofu merchant was not a trusted vendor, the Tofu note probably didn’t function. If a random person started issuing the Tofu notes, then nobody would take it. The Tofu merchant probably existed for a while and was a trustworthy business. The opposite happened with the Samurai government and the rice notes. When they dishonored the note, the market panicked. The central government tried to control the issuing of rice notes while protecting the merchants.

How often do we see factories claiming to have implemented the Kanban? And they are in the middle of hyper-inflated inventories? When they have problems, they print more Kanban. They come up with weird equations without any root cause analysis. Taiichi Ohno was clear that one of the rules of Kanban is 100% quality. There is a saying called Gresham's law: "Bad money drives out good.” When you mix defects inside a Kanban, we know what will happen. And these factories creating hyperinflation of Kanban claim that Kanban doesn’t work.

Today, in Japan, the product notes issued by good merchants can be cashed at ticket shops.